HF Foods Group Inc.

HF Foods Reports Strong Second Quarter 2021 Financial Results

CITY OF INDUSTRY, Calif., Aug. 09, 2021 (GLOBE NEWSWIRE) — HF Foods Group Inc. (NASDAQ: HFFG), a leading food distributor to Asian restaurants across the Southeast, Pacific and Mountain West regions of the United States, reported strong financial results for the second quarter ended June 30, 2021.

Second Quarter 2021 Financial Summary

  • Net revenue increased 85.1% to $193.5 million compared to $104.6 million in the second quarter of 2020.
  • Gross profit increased 70.5% to $35.1 million, or 18.2% of net revenue, from $20.6 million, or 19.7% of net revenue, in the second quarter of 2020.
  • Net income attributable to the Company increased to $3.6 million, or $0.07 per diluted share, compared to a net loss of $4.1 million, or $(0.08) per diluted share, in the second quarter of 2020.
  • Adjusted EBITDA increased 249.2% to $11.9 million compared to $3.4 million in the second quarter of 2020.

Management Commentary

“The momentum of our business at the start of the year only strengthened in the second quarter,” said Peter Zhang, CEO of HF Foods. “We experienced strong growth across most financial metrics both on a year-over-year and sequential basis due to improving market conditions and the proactive actions we took last year to right-size our business during the pandemic. In fact, during the second quarter our business performed at 93% of pre-COVID levels and has continued to remain stable since then.

“We remain optimistic on the long-term prospects of our business. Although we continue to face intermittent government restrictions on our customers’ operations, we believe that our sales volume will increase over time as the effects of the COVID-19 pandemic dissipate and consumer demand for food away from home continues to increase. As the market leader in servicing the Asian/Chinese restaurant sector, we believe we are well-positioned for long-term success. The fragmented nature of the Asian/Chinese food service industry and the current environment create opportunities for a company like HF Foods, which has the necessary industry expertise and deep understanding of our unique customer base.”

Second Quarter 2021 Results

Revenue for the second quarter of 2021 increased 85.1% to $193.5 million compared to $104.6 million in the second quarter of 2020 due to a strong market recovery, particularly since the second quarter last year reflected the height of the pandemic-related business restrictions.

Gross profit in the second quarter of 2021 was $35.1 million (18.2% of net revenue), a 70.5% increase from $20.6 million (19.7% of net revenue) in the same year-ago quarter. The increase was due to the increase in revenue.

Distribution, selling and administrative expenses in the second quarter of 2021 increased to $29.9 million from $25.1 million in the second quarter of 2021. The increase was primarily attributable to salary, wage and fuel cost increases due to the strong revenue growth.

As a result, net income attributable to the company in the second quarter of 2021 improved to $3.6 million, or $0.07 per diluted share, compared to a net loss of $4.1million, or $(0.08) per diluted share, in the second quarter of 2020.

Adjusted EBITDA for the second quarter of 2021 increased 249.2% to $11.9 million, compared to $3.4 million in the second quarter of 2020. The increase was due to the strong revenue growth.


As of June 30, 2021, HF Foods had $13.4 million in cash and access to over $80 million in additional funds through its $100 million line of credit, subject to a borrowing base calculation.

About HF Foods Group Inc.

HF Foods Group Inc., headquartered in City of Industry, California, is a leading marketer and distributor of fresh produce, frozen and dry food, and non-food products to primarily Asian/Chinese restaurants and other foodservice customers throughout the Southeast, Pacific and Mountain West regions of the United States. With 13 distribution centers along the U.S. eastern and western seaboards, HF Foods aims to supply the increasing demand for Asian American restaurant cuisine. With an in-house proprietary ordering and inventory control network, more than 10,000 established customers in 21 states, and strong relations with growers and suppliers of food products in the US and China, HF Foods Group is able to offer fresh, high-quality specialty restaurant foods and supplies at economical prices to its large and growing base of customers. For more information, please vis www.hffoodsgroup.com.

Non-GAAP Financial Measures

Adjusted EBITDA: The Company believes that adjusted EBITDA is a useful performance measure and can be used to facilitate a comparison of the Company’s operating performance on a consistent basis from period to period and to provide for a more complete understanding of factors and trends affecting the business than GAAP measures alone can provide. Management believes that adjusted EBITDA is less susceptible to variances in actual performance resulting from depreciation, amortization and other non-cash charges and more reflective of other factors that directly affect our operating performance. Management believes that the use of these non-GAAP financial measures provides an additional tool for investors to use in evaluating ongoing operating results and trends and in comparing the Company’s financial performance with that of other companies in the same industry, many of which present similar non-GAAP financial measures to investors. The Company presents adjusted EBITDA in order to provide supplemental information that the Company considers relevant for the readers of our consolidated financial statements included elsewhere in its reports filed with the SEC, including its current Quarterly Report on Form 10Q, and such information is not meant to replace or supersede U.S. GAAP measures.

The following table sets forth of the calculation of adjusted EBITDA and reconciliation to net income (loss), the closest U.S. GAAP measure:

For the Three months ended June 30, Changes
2021 2020 Amount %
Net income (loss) $ 3,505,039 $ (4,314,190 ) 7,819,229 181.2 %
Interest expense 709,342 324,319 385,023 118.7 %
Income tax provision (benefit) 1,377,098 (1,489,305 ) 2,866,403 192.5 %
Depreciation & Amortization 4,259,434 4,335,932 (76,498 ) (1.8 ) %
EBITDA 9,850,913 (1,143,244 ) 10,994,157 961.7 %
Unrealized change in fair value of interest rate swap contracts 112,256 1,264,254 (1,151,998 ) (91.1 ) %
COVID-19 bad debt reserve (recovery) 1,886,781 (1,886,781 ) (100.0 ) %
Non-recurring expenses* 1,957,857 1,405,671 552,186 39.3 %
Adjusted EBITDA $ 11,921,026 $ 3,413,462 8,507,564 249.2 %
Percentage of revenue 6.2 % 3.3 % 2.9 % 88.7 %

Forward-Looking Statements

All statements in this news release other than statements of historical facts are forward-looking statements which contain our current expectations about our future results. We have attempted to identify any forward-looking statements by using words such as “anticipates,” “believes,” “could,” “expects,” “intends,” “may,” “should” and other similar expressions. Although we believe that the expectations reflected in all of our forward-looking statements are reasonable, we can give no assurance that such expectations will prove to be correct. Such statements are not guarantees of future performance or events and are subject to known and unknown risks and uncertainties that could cause the Company’s actual results, events or financial positions to differ materially from those included within or implied by such forward-looking statements. Such factors include, but are not limited to, unfavorable macroeconomic conditions in the United States, competition in the food service distribution industry, particularly the entry of new competitors into the Chinese/Asian restaurant market niche, increases in fuel costs or commodity prices, disruption of relationships with vendors and increases in product prices, U.S. government tariffs on products imported into the United States, particularly from China, changes in consumer eating and dining out habits, disruption of relationships with or loss of customers, our ability to execute our acquisition strategy, availability of financing to execute our acquisition strategy, failure to retain our senior management and other key personnel, our ability to attract, train and retain employees, changes in and enforcement of immigration laws, failure to comply with various federal, state and local rules and regulations regarding food safety, sanitation, transportation, minimum wage, overtime and other health and safety laws, product recalls, voluntary recalls or withdrawals if any of the products we distribute are alleged to have caused illness, been mislabeled, misbranded or adulterated or to otherwise have violated applicable government regulations, failure to protect our intellectual property rights, any cyber security incident, other technology disruption, or delay in implementing our information technology systems, statements of assumption underlying any of the foregoing, the continuing impact of the Covid-19 pandemic, and other factors disclosed under the caption “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2020 and other filings with the SEC. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date made. Except as required by law, we undertake no obligation to disclose any revision to these forward-looking statements.

Investor Relations Contact:

[email protected]

HF Foods Group Inc. and Subsidiaries
Condensed Consolidated Balance Sheets

As of
June 30,
December 31,
Cash $ 13,425,792 $ 9,580,853
Accounts receivable, net 30,308,639 24,857,322
Accounts receivable – related parties, net 1,921,415 1,261,463
Inventories, net 64,061,582 58,535,040
Advances to suppliers – related parties, net 196,803
Other current assets 3,819,451 4,614,164
TOTAL CURRENT ASSETS 113,536,879 99,045,645
Property and equipment, net 134,755,748 136,869,085
Operating lease right-of-use assets 16,326,011 931,630
Long-term investments 2,425,625 2,377,164
Intangible assets, net 170,352,500 175,797,650
Goodwill 68,511,941 68,511,941
Deferred tax assets 59,079 57,478
Other long-term assets 1,253,212 694,490
TOTAL ASSETS $ 507,220,995 $ 484,285,083
Bank overdraft $ 15,018,435 $ 14,839,747
Line of credit 19,111,822 18,279,062
Accounts payable 41,668,144 28,602,570
Accounts payable – related parties 1,956,629 1,572,427
Current portion of long-term debt, net 5,804,100 5,641,259
Current portion of obligations under finance leases 272,648 286,903
Current portion of obligations under operating leases 610,256 308,148
Accrued expenses and other liabilities 5,123,479 6,178,144
Obligations under interest rate swap contracts 393,479 993,516
TOTAL CURRENT LIABILITIES 89,958,992 76,701,776
Long-term debt, net 85,142,465 88,008,803
Promissory note payable – related party 5,500,000 7,000,000
Obligations under finance leases, non-current 630,774 766,885
Obligations under operating leases, non-current 15,930,735 623,482
Deferred tax liabilities 45,078,908 46,382,704
TOTAL LIABILITIES 242,241,874 219,483,650
Preferred Stock, $0.0001 par value, 1,000,000 shares authorized, no shares issued and outstanding as of June 30, 2021 and December 31, 2020, respectively
Common Stock, $0.0001 par value, 100,000,000 shares authorized, 51,913,411 shares issued and outstanding as of June 30, 2021 and December 31, 2020, respectively 5,191 5,191
Additional paid-in capital 583,723,206 587,579,093
Accumulated deficit (322,030,870 ) (327,150,398 )
Non-controlling interests 3,281,594 4,367,547
TOTAL SHAREHOLDERS’ EQUITY 264,979,121 264,801,433

HF Foods Group Inc. and Subsidiaries
Condensed Consolidated Statements of Operations

For the Three Months Ended June 30, For the Six Months Ended June 30,
2021 2020 2021 2020
Net revenue – third parties $ 190,460,529 $ 101,105,691 $ 347,451,896 $ 271,814,931
Net revenue – related parties 3,085,707 3,454,405 5,476,168 8,548,501
TOTAL NET REVENUE 193,546,236 104,560,096 352,928,064 280,363,432
Cost of revenue – third parties 154,919,694 80,707,172 282,559,053 222,666,532
Cost of revenue – related parties 3,492,238 3,240,140 5,805,116 8,109,071
TOTAL COST OF REVENUE 158,411,932 83,947,312 288,364,169 230,775,603
GROSS PROFIT 35,134,304 20,612,784 64,563,895 49,587,829
DISTRIBUTION, SELLING AND ADMINISTRATIVE EXPENSES 29,903,759 25,092,568 58,031,254 54,499,161
INCOME (LOSS) FROM OPERATIONS 5,230,545 (4,479,784 ) 6,532,641 (4,911,332 )
Other Income (Expenses)
Interest income 132 263
Interest expense (709,342 ) (324,319 ) (1,451,483 ) (2,275,888 )
Goodwill impairment loss (338,191,407 )
Other income 473,190 264,730 912,749 670,380
Change in fair value of interest rate swap contracts (112,256 ) (1,264,254 ) 1,318,636 (1,264,254 )
Total Other Income (Expenses), net (348,408 ) (1,323,711 ) 779,902 (341,060,906 )
INCOME (LOSS) BEFORE INCOME TAX PROVISION (BENEFIT) 4,882,137 (5,803,495 ) 7,312,543 (345,972,238 )
PROVISION (BENEFIT) FOR INCOME TAXES 1,377,098 (1,489,305 ) 1,984,305 (1,971,516 )
NET INCOME (LOSS) 3,505,039 (4,314,190 ) 5,328,238 (344,000,722 )
Less: net income (loss) attributable to non-controlling interests (91,557 ) (255,287 ) 208,710 (57,877 )
NET INCOME (LOSS) ATTRIBUTABLE TO HF FOODS GROUP INC. $ 3,596,596 $ (4,058,903 ) $ 5,119,528 $ (343,942,845 )
Earnings (loss) per common share – basic and diluted $ 0.07 $ (0.08 ) $ 0.10 $ (6.60 )
Weighted average shares – basic and diluted 51,913,411